Opinion: Bracing for the Cliff

This transcript has been automatically generated and may not be 100% accurate.

... I ... the ... the ... into the Lodge on Dan Henninger ... well clear scraps no greater consensus in Washington and then that entitlement reform is crucial to the country's fiscal health ... however nothing seems clear in the ... in the cliff talks right now for the fiscal cliff that the entitlement seem to be slipping over the cliff in terms of reform ... so here to talk to me about what really realistically do about entitlement reform is our job rate that and I Joe ... so if we're creating kind of ... our reform died for realist for entitlements how might we approach Medicare ... right will the Republicans really need to serve dial back their ambitions in the last two years they've been talking about ... Paul Ryan's premium support ... of planned that's ... obviously not can happen we've litigated that ... in the election so one thing that they can do is something called and ... comprehensive caution and where ... right now Medicare traditional Medicare is three separate programs each with their own co pays deductibles ... on ... seniors generally buys Mikko Medigap to offset all those premiums what this would do it ... bring everything together ... give seniors more skin in the game ... and and start to bring down costs that the problem and Italy combined into a single progress actually one unified modern program yet on the dip looks a lot more like the private insurance you might have ... on through teacher or employers ... the problem on health care is that there's not a lot you can do this horrible that's the Congressional Budget Office washable and measure how much you save so ... although it's the ... biggest contributor to the fiscal problem ... it's also the hardest to result at least in terms of the ... art don't weigh ... these mines are much against their ... words ... this sounds like a great idea to me ... the simplification turns out to be complex exactly right time and then connecting you know who knows how the budget homes will look at the same I find it increases costs to know stuff ... so it's it's always tricky there ... and and is adding ... to the talks are an impasse right now I'm part of that is ... there's there's not a lot you can do no ... social security I mean that's something that ... the paper talking about running with it into a separate track on the song right they refer to it is the sidecar so basically ... they won a result its fiscal Proms make it's all been in the long run on its on its own terms ... by itself ... so it did that this sort of demand that the peace or is this is a separate program ... op also ... is ... coming to the impasse ... what is so swirly most straightforward things that you go to ... patch Social Security ... typically difficult for right now that the big the big problem is that ... Sosa Security benefits grow each year ... all of these some measure of inflation that overstates ... inflation some seniors are getting far more than they paid into the program and far more than the growth of the economy ... so what what he would do is is means tested the would say in effect in effect ... it's called progressive indexation ... time it would be read by the benefits would grow more slowly ... and ... fewer of them would flow to the most affluent seniors ... but to understand is the way it's done now it's indexed to wage is and what they're talking about France's is indexing it to crisis which strikes me ... as a more realistic weighted index of security that's what people are paying for ... right absolutely aam did a lot of the Republicans are going a little bit smaller and Sosa scary than four per precedents Asian summit called chained CPI ... which which the ... indexes to prices and a substitution effects for ... how senior spend their money it doesn't ... go as far ... as progress in the next ration doesn't really solve the problem that might be altering yet about this this this round we have a bottom in a live show why the objections to linking of the indexation to prices is that effectively it's a tax increase for the seniors ... but this raises the question of what ... realistically Social Security has the palm ... write to me means testing is a trend that left the station years ago ... Medicare's are means tested ... twice its cars were popping of a third round of means testing ... and we we should be clear this is a tax increase the equivalent of a tax increase ... of the but ... it's not the same ... as for instance raising the cap on on wages ... for which the payroll tax is applied for for example ... it essentially saying ... seniors you're you're going get less ... free and I can pay more ... and that's much less economically ... damaging ... I'm an increasing taxes to pay for a larger transfer program which is where Sosa Security he's he's had an aunt cousin to write thank so much of the things in ... red tape with partial break now what I come back all she goes gonna talk to me about the emergence of al Qaeda in the short ... stay with us ... welcome back to Opinion Journal I'd well deatails are just beginning to emerge about an extraordinary plot by al Qaeda to carry out a mass of terror campaign in Jordan ... this would involve attacks on tourists of embassies ... including the United States embassy ... to discuss and analyze the plot with me is the Journal's editorial page editor Paul to go to the ... mall this is so curly remarkable story was first reported in Cleveland Washington post and don't store very wide scale attack in Jordan was planned by al Qaeda ... seems to be by al Qaeda in Iraq right right right as it's concerning a couple of ... couple of ways one is the ... signals the ... revival of ... of al Qaeda in Iraq remember that have been really damage ... even to the point of being barely able to marshal attacks by the surge ... in the successful surge of two thousand ... seven and eight ... and um ... even ... in the early years of the ... Obama administration a Q why is it scones under ... control ... go with the ... withdrawal of all U S troops ... in what everybody's gone ... I am from Iraq now ... if the Iraqis are in charge of security ... neque eyes making a comeback ... and not only a comeback in Iraq ... that this is where Jordan comes and ... it looks like they're moving into Syria and Jordan ... will be seen to be alone in Jordanians were rested of body toward preventing police in October ugly ... and the Jordanian saved eleven trained in Syria have been supported by Elpida from Iraq ... so it can be done some pretty dumb ... possible situation is no question that that al Qaeda's from playing in Syria I controls been growing since the time since the revolution There started the rebellion started dairy ... how long more than the half I think it's almost your half ago ... aam ... and because the US has been playing ... almost no world helping the opposition ... which are seeing is that some of the of ... the aid to them is coming from the ... parties ... and from al Qaeda people were on ... a writ large ... and so the opposition there is becoming increasingly ... infiltrated with ... al Qaeda ... and they're getting training and weapons ... are getting ... and communication ... beginning the weapons ... in the communications equipment ... and the mesh Trading is very clear from the spot ... India Jordan where they could be stabilize that government ... that would have very damaging consequences for the rest of the Middle East and a newsreel ... what ... what what you think the political consequences of the Tsar Paul I mean the ... Obama ministrations already tangled up in what happened and been Garcia netball ... Al Qaeda in Islamic McGrath ... and now this now remember had hoped that it was decimated are suppose to vendor in the campaign as I think the president put it exactly ... and Susan Rice put it ... well ... look I mean what were seen here I think is a general deterioration of security across the board in them at least ... freely across the board you seen the turmoil in Egypt ... so ... you're seeing the post ... Ghadafi period he and maybe having a lot less stable than it might have done it ... again ... in part because we ... basically will wash their hands of the situation after Ghadafi fell and the parties to come and ... and and provided a good deal ... for radical SoCal ... their ... radical Sony and their supporting radical saw initial difficulty exactly what the U S alternative to the stage as well I mean ... when you wash your hands and it is very difficult and we know we ... we could come in and play a more active role I think in terms of shaping events ... that somehow this administration works ... or are we seeing weeks now that the administration ... is worried about the trend ... may start thinking about doing more in Syria ... but ... is very hard to trust them frankly to weather them out they have the nerve ... in the end of the gumption ... to go in and actually attempt to shape events in a way that other than just tangential Dell Arike ... ah well let's turn on other of subject to seize the spinning out of control and that's the fiscal cliff ... of the cliff I think is beginning to look to allow Republicans like the suicide lead with only them ending up in the pot ... the staff we're talking over the weekend ... calling the president's proposal a joke flabbergasted ... where does he stand right now with the negotiation which to suppose that then buy the December thirty first floor was nothing happening now I mean nothing literally there's no lack of negotiations to sell phone calls being made at least as of this morning not to ... be okay so here I since last Thursday when the meeting on Capitol Hill with Republicans and with Tim Geitner ... on there's nothing that's happened other than its ... reliance on him people speaking their lives on on TV ... and akward in the water when things going on what game do think on the White House is playing here they propose to two hundred billion dollars in new spending ... and ... Dana thanks us flabbergasted their proposed that of Congress no longer sign off on increases in the debt limit to the Republicans regard that doesn't show ... enough Tim Geitner says well we made our proposal the balls Amerco Whelan one point six trillion in tax increases over ten years and only four hundred billion in spending cuts ... starting in the future ... so tax increases now ... spending cuts in the future ... and nothing really serious on the entitlement side ... so you're left with thinking four dollars in tax increases for every one dollar and spending cuts and rates go up and ... deductions ... go down in terms of what you can take ... some is economically destructive it's not politically serious Republicans can't possibly accepted into the face of an opening gambit ... or is this really what they wanted was to stop them if they do that ... then I think you're were weren't we are headed over the cliff because Republicans kept ... a buy it now Republicans are going to have to think about a plan B ... which I think is something like ... should they just give the president what he's demanding on the middle-class tax ... extension Greg those rates ... and now I'm not ... and then say ... Mr President ... you're not serious about spending so ... that's it we go home ... the the the the SEC West or the spending cuts go lucky and ... that you may get ... painful as they are on defense ... in the debt limit in February and okay Mr President you come back to us the reason survived politically ... well I think it's ... I think it's politically less damaging than just going over the class ... in all respects because at least a removal of middle-class tax increase charged that the president is now making against them that there were into raising taxes ... on the middle class ... aam but to um ... an economically would still be pretty distracted ... and as a sign that the president ... isn't ... all of Washington can govern it would be destructive for all parties and the president in included ... yet I would think that the ... pool for most of the present in Congress would plummet ... went to some like this I would think now you know there's an increasing body of opinion on Capitol Hill among Republicans that actually that's with the prisoner was no I don't like I can prove that I don't know if that's true ... they say they don't ... in private ... but the evidence from beginning to build the Republicans are increasingly of a mind that maybe the president's goal here is actually to destroy the party ... to to break Grover Norquist and the tax plan to have these two and the Democrats are trying to break the filibuster in the Senate extraordinary ... I mean he really does doesn't care so much about ... the aisle ... by his approval rating ... so what does he cares about grinding the Republicans into ... I'm friends and family claimed support not much more ... and that and then ... kill emerge from that stronger because you can blame them for any fallout ... and then he'll be he'll be fine down the road and maybe to take back Congress in two years ... I drove that's true ... but ... in the way they're acting so far ... down the one that you have to wonder ... well okay Paul exciting for us in the news business might be a little bit tough on the country ... are ... are ever going to take a break when we come back and I were to talk about how a ... piece of art valued at sixty five million dollars then dropped to zero without being destroyed ... stay with this ... well from the world of high art comes a story that really belongs in Ripley's believe it or not ... Eric Gibson The Journal's leisure and arts editor will relate the fantastic tale involving art by the late Robert Rocher for welcome Eric thanks to ... Eric up on art dealer named Julianna sunburnt home of artwork by Roche over called ... canyon which happened include a real stop bowl beagle ... that's when the fun began ... it is when the fun began when she was for the most prominent contemporary art dealer is of the of the fifties sixties and seventies she died ... in two thousand and seven leaving a ... large collection of works by around converge on the little people like that it was valued at about one billion dollars ... her errors to restate paid ... over four hundred million dollars estate tax on that it had to sell six hundred million dollars worth of art ... to raise the money to pay the taxes on ... one object in her collection was this work can begin to inspire an ocean burn it's been referred to as the combo which is a kind of a large scale ... three dimensional Coal Mission born in the elements of the St ... what's this stuff Baltic Eagle on a sticky note ... and it's taking on too ... why I wouldn't waste while practically ... and ... this ... is the port ... I'm a value on it of zero dollars because it could not be sold without ... breaking into law on this one relating to endangered species one passed in nineteen forty the other night he can ... give women a criminal offence to sell this war ... so because it was unassailable there are three appraiser is one of which was Christie's auction house value to zero ... the IRS came back and said ... we value it at ... sixty million dollars ... you stay with my taxes and we want taxes ... the estate ... refused and valuation because they said that Apple's Norges you can't ... put a monetary value want something that has no value in the marketplace ... the IRS and then upped the ante and came back with not only a valuation much higher sixty five million dollars ... but they assessed a special penalty call them undervaluation penalty of ... just over eleven million dollars and this is for ... parties to end their feud deliberately ... and the car is grossly undervalued at ... their proper so it sounds as though the owners of this Rosenberg were being pushed over what we'll call the Arctic let his article with and that something that they would want to so what are they end up doing ... will bear their position was that since it had zero value they would be well and couldn't be sold ... they would be willing to donate it to a museum ... but ... acknowledging that they would have to do so without taking any of the tax deductions to recruit people donating appreciated property ... so they they ... did this in exchange for the honor is dropping the forty plus million dollars tax bill so ... it's now in the collection to meet these new watermark only on supply ... so well one has to ask is this a one off for ... our future works of art committee put in the same of both well did it does have serious implications for four proceed with the modern contemporary art ... market because since Picasso and Brock began ... putting pasted paper on their campuses mix extended their pain ... artists have always used ... on Orthodox materials and ... it's not beyond the realm of possibility that other artworks could be singled out Damien Hirst has won and ... he does come to mind that one of the hot shots he's best known for the shark in formaldehyde ... of but he's also made ... three what he calls Haschke Ricky sculptors which are literally ... sculptures that that consists mainly of cigarette products ... to cigarette packaging tobacco flash ... and it's conceivable that in the anti smoking climate we live in one day those could ... face ... in the same penalty the canyon and they could be declared ... and you become stable ... Mike Bloomberg points ... afterward and had to write thank you so much America into ... ok that's a bridge on Opinion Journal I'd mind Dan Henninger joins again tomorrow afternoon ...